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Bonds Rise for Third Day in a Row

November 4, 1999

NEW YORK (AP) _ Prices of Treasury bonds rose for a third day in a row Thursday after a newspaper report triggered optimism among investors that the Federal Reserve may not raise interest rates again this year.

The price of the benchmark 30-year Treasury bond, rose 1/2 point, or $5 per $1,000 invested. Its yield, which moves inversely to the price, fell to 6.10 percent from 6.13 percent on Wednesday.

Bond prices rose after The Washington Post reported that the Fed is unlikely to push up rates before the end of the year because of growing signs that the nation’s economic growth is cooling. A higher rate of return on newly issued fixed-rate securities, such as bonds, would hurt the value of existing ones.

Fed policy-makers meet next on Nov. 16 to decide whether to raise interest rates for a third time this year, and many economists and Wall Street observers had believed it would act to check nascent inflation pressures in the economy.

But signs are growing that the economy is not overheating. On Thursday, the Labor Department said the number of Americans filing new claims for unemployment benefits rose to 288,000, up 8,000 from the previous week. Another key report arrives Friday, when the government reports on unemployment and wages for the month of October.

Prices for short-term securities rose 1/16 point to 3/32 point, while intermediate treasury securities rose 3/16 point to 13/32 point, reported Bridge Telerate, a financial information service.

In other trading, yields on three-month Treasury bills dropped to 5.06 percent, while the discount fell to 4.93 percent, down 0.03 percentage point from Wednesday. Six-month yields rose to 5.31 percent, while the discount increased 0.01 point to 5.10 percent.

One-year yields fell to 5.39 percent while the discount fell to 5.12 percent, down 0.02 percentage point.

Yields are the interest bonds pay by maturity, while the discount is the interest at which they are sold.

The federal funds rate, the interest on overnight loans between banks, rose to 5.31 percent from 5.13 percent on Wednesday.

In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds rose 17/32 point to 110 7/32. The average yield to maturity fell to 6.03 percent from 6.07 percent on Wednesday.

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